Whitehall bonuses to be slashed by 65% to save £15m

Whitehall and NHS bonuses will be slashed by 65% in a bid to save £15m a year, the new coalition government has pledged.

The new Conservative and Liberal Democrat government has said in future bonuses will be restricted to the top 25% of senior civil servants who have performed “exceptionally well”.

This year, three-quarters of senior civil servants will be paid bonuses but, under Whitehall contracts drawn up by the former government, these bonuses cannot be cancelled by the incoming government.

The new Cabinet Office minister Francis Maude said it was right that the most highly paid civil servants “play their part” in reducing the public sector pay bill.

He said: “An effective system will reward the best performers and provide the right incentives for all to get the best for the taxpayer.

“There is no place in the modern Civil Service for a presumption of good performance. Rewards must be earned through excellence assessed through a hard-headed and objective appraisal process.”

A Number 10 source told the Telegraph that cancelling the pay-outs should be seen as an “emblem” of the new coalition government’s desire to get spending within the public sector under control.

The bonus restriction could affect about 4,200 people employed in the Senior Civil Service (SCS) and 1,100 NHS senior managers.

In 2008-09, the average bonus payment for a director general in the SCS was £12,700, while NHS senior managers received up to 7% of their salary.

The government has also pledged to set up a commission to limit pay for Whitehall chiefs to no more than 20 times that of their lowest-paid staff. The pay rules will apply across Whitehall, local government and the NHS.

Prime minister David Cameron has also said that he will cut the previous government’s £1.5bn spend on management consultants.

A taskforce, due to launch today, will also start examining all government spending to find ways of cutting back.

More detailed plans are expected to be set out in an emergency Budget next month, which will be followed by a comprehensive spending review.